Our annual ranking of small tech: only one first place but many winners

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Mar. 14, 2005 — Today 10 states earned bragging rights for being among the hottest regions for one of the hottest new technologies. Making Small Times’ list of the top 10 states for micro and nanotechnology brings prestige to the winners and perhaps consternation to their contenders.

But the real rewards, state economic developers know, will come later. States that can maintain their dominance expect their fledgling companies to grow into profitable businesses with large staffs making high salaries that feed the local economy. They anticipate a second wave of service industries to support their technology core, bringing more jobs, incomes and tax revenues.

For the fourth year in a row, Small Times assembled a state-by-state ranking to determine which states stand out as leaders in micro and nanotechnology. The winners, from No. 1 to 10, are: California, Massachusetts, New Mexico, New York, Michigan and Texas in a tie for fifth, Illinois, Maryland, North Carolina and Ohio.


The complete 2005 state rankings analysis is available exclusively in the print edition of Small Times magazine. Subscribe now so you don’t miss next year’s rankings. If you’re not already a subscriber but you’d like a copy of this year’s rankings issue, you can order a copy to be delivered by calling 734-528-6252 or by faxing in this form.


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This is the first year that North Carolina made the cut, and the second appearance by Maryland, which ranked 11 the previous year. Michigan rose in the rankings, up from No. 8, and Illinois fell a spot to No. 7. California, Massachusetts and New Mexico maintained their win, show and place standings, and Ohio once again nabbed the No. 10 berth.

But this is only the first stretch in a marathon. Four years of analysis have shown that states can stumble and come back, or make a sustained charge, or fade behind their competitors. Even states in the middle of the pack have their eyes on the ultimate prize: the chance to improve their state economies. One state may be first, but dozens can be winners.

How we do the rankings

The rankings follow a standard economic model for tracking technology development in states by measuring activities in six categories: research, industry, venture capital, innovation, workforce and costs. States get a score in each category. The categories are then weighted and added for a final score.

Economists see these six categories as critical for building what they call knowledge-based economies. Knowledge-based economies start with ideas that can be developed into products and processes, and are a hallmark of high-tech societies.

The research category looks at the amount of research each state conducts in its university, industrial and national laboratories. This category is considered fundamental for a knowledge-based economy because it is where ideas are created and refined. Among other things, the category measures the amount of funding each state gets in a year, the number of micro and nanotech centers it has and the number and amounts of micro- and nanotech-specific grants it receives from the National Science Foundation.

The industry category counts the number of micro and nanotech companies each state holds using Small Times’ proprietary database. Venture capital, also tracked through the proprietary database, looks at the number and amounts of VC deals by micro and nanotech companies. Innovation covers micro- and nanotech-specific patenting and federally funded awards to small businesses. Workforce looks at how well each state can provide the skilled labor needed for high tech, and the costs category examines everything from energy prices to housing and commuting times.


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Sources: National Science Foundation, National Institutes of Health, Departments of Defense, Energy and Commerce, Environmental Protection Agency, NASA, U.S. Census Bureau, U.S. Patent and Trademark Office, Bureau of Labor Statistics, PricewaterhouseCoopers/Thomson Financial Venture Economics/National Venture Capital Association MoneyTree Survey and Small Times research. Research by Candace Stuart and David Forman, with support from Gretchen McNeely.


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The top 10

1. California: California sprinted to the front in the first analysis by Small Times and has not given up ground since. An entrepreneurial spirit permeates the campuses of Stanford University, the University of California, Berkeley and a dozen other research institutions whose scientists and engineers then patent their inventions and start companies. It has the venture capitalists to support emerging technology companies, and this year it even showed it can muster up the workforce to sustain them. It is also the most expensive state in the union for doing business, a factor that may compel companies to leave once they mature. Last year’s ranking: 1

Its category placements are:
Research: 1
Industry: 1
Venture capital: 1
Innovation: 1
Workforce: 4
Costs: 50

2. Massachusetts: Massachusetts is beginning to look beyond Boston and its suburbs for ways to build up its expertise in micro and nanotechnology. Harvard University, Massachusetts Institute of Technology and several other Boston-based campuses shine in research while the University of Massachusetts at Lowell is prepared to tackle the next challenge facing industry: nanomanufacturing. Last year’s ranking: 2

Its category placements are:
Research: 4
Industry: 2
Venture capital: 2
Innovation: 2
Workforce: 1
Costs: 48

3. New Mexico: New Mexico’s Sandia National Laboratories and Los Alamos Laboratory put the state on the map for micro and nanotechnology. They contribute to an industrial base that is small compared to California, but very concentrated. And the labs are largely staffed by doctorate-bearing scientists and engineers, which is a boon to the state’s workforce. New Mexico has trouble attracting venture capital, but excels at landing Small Business Innovation Research awards. Those provide a lifeline for young companies, but one that is often short term. Last year’s ranking: 3

Its category placements are:
Research: 6
Industry: 3
Venture capital: 21
Innovation: 3
Workforce: 3
Costs: 24

4. New York: New York made its move last year, jumping from seventh place to fourth. The state continues to build off its vast research capabilities, with the State University of New York system, Columbia University, Cornell University, Rensselaer Polytechnic Institute and Brookhaven National Laboratory all contributing. With Albany Nanotech growing strong, it’s well positioned to move even higher. The research and development/educational behemoth now has more than $1 billion in state and industrial support and is home to the University of Albany’s new College of NanoScale Science and Engineering. Last year’s ranking: 4

Its category placements are:
Research: 2
Industry: 5
Venture capital: 6
Innovation: 8
Workforce: 5
Costs: 46

5. Michigan (tie): Michigan is not a newcomer to micro and nanotechnology, or to building ties between academia and industry. The University of Michigan began making a name for itself decades ago with innovations in automotive and biomedical microsystems, and now maintains the Wireless Integrated MicroSystems Center. Wayne State University and its industrial partner Delphi Corp. worked together to create a smart sensors facility. The state also is active in nanomaterials, particularly dendrimers, which were discovered at Central Michigan University. But Michigan may have a hard time maintaining the No. 5 spot if it continues to let contenders make inroads in the workforce and research categories.

Its category placements are:
Research: 11
Industry: 4
Venture capital: 3
Innovation: 5
Workforce: 17
Costs: 27

5. Texas (tie): It may be a case of other states doing more rather than Texas doing less. Texas slipped in the research category as states like North Carolina apparently stepped up their efforts to win lucrative micro and nanotech research grants. Like many states, it saw an increase in its number of micro and nanotech companies, but other states had bigger increases. But Texas racked up enough venture capital to make the top 10 list in that category and improved its workforce standing significantly. Last year’s ranking: 5

Its category placements are:
Research: 9
Industry: 7
Venture capital: 4
Innovation: 4
Workforce: 18
Costs: 23

7. Illinois: Illinois has one of the highest scores among states for its micro and nanotech research, but hovers in the teens in other key categories. And its research score fell a few points compared to the previous year, making its safety net a little less robust this year. Illinois may just be a little slower than other states at commercializing the work at its research institutions. In Illinois, those include Northwestern University, the University of Illinois campuses and Argonne National Laboratory. Last year’s ranking: 6

Its category placements are:
Research: 3
Industry: 17
Venture capital: 13
Innovation: 13
Workforce: 14
Costs: 38

8. Maryland: It’s been a bit of a rollercoaster ride for Maryland, which ranked 11 last year after placing No. 6 the year before that. Many states fare better than Maryland for the patenting of micro and nanotechnology. But the state has one draw that can’t be beat: the National Institute of Standards and Technology’s world-class measurement lab at Gaithersburg. The lab provides the research and business community with top-notch talent and equipment for studying micro and nanotech devices. Last year’s ranking: 11

Its category placements are:
Research: 5
Industry: 11
Venture capital: 9
Innovation: 28
Workforce: 2
Costs: 44

9. North Carolina: North Carolina makes its debut in the rankings this year by capturing more research and venture capital dollars than many of its competitors. The North Carolina Center for Nanoscale Materials, a consortium of the University of North Carolina, Duke University and North Carolina State University, shows that teamwork pays. Other states are nurturing more micro and nanotech startups, though, which could prove a problem for North Carolina in the future. Last year’s ranking: 17

Its category placements are:
Research: 8
Industry: 18
Venture capital: 5
Innovation: 11
Workforce: 10
Costs: 32

10. Ohio: Ohio does it again. The state’s diversity extends from border to border with an array of micro and nanotech research initiatives and companies. NASA, the U.S. Air Force, Cleveland Clinic, Ohio State University, Case Western Reserve University all offer research programs. Collaborations among these groups are on the rise, which could lead to some novel products. Venture capital remains a problem spot. Last year’s ranking: 10

Its category placements are:
Research: 10
Industry: 10
Venture capital: 23
Innovation: 16
Workforce: 16
Costs: 26

States to watch

Connecticut: Last year’s No. 9 state slipped two rungs compared to last year, but it still shows a healthy amount of commercialization.

Pennsylvania: Chances are good that Pennsylvania, the No. 7 state last year, will be back in the pack in the future. It made a respectable showing in most measures except federal business awards. That one poor score in what is typically a volatile measure yanked it down to 12th place.

Virginia: Virginia keeps nudging north in the rankings, placing 15th this year after coming in 18th the previous year. Its micro and nanotech activity may include some defense work that doesn’t appear in public or Small Times databases.

Florida: Florida moves its way up by pulling in more research and small business support for projects that include military and health applications.

Wisconsin: Madison deserves recognition for its ability to commercialize innovations from the University of Wisconsin. Wisconsin will have a hard time ascending to the top tier, though, if Madison remains the sole source of micro and nanotech growth.

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